Japan's decision to dispatch troops from its self-defence force to southern Iraq has marked a watershed inthe country's postwar history and jarred the pacifist roots of its constitution.

But while Japan may now be shipping its soldiers to Samawah, it still struggles to export Japanese-made weapons. A four-decade ban on the sale of weapons abroad has left the country's defence industry largely impotent on the world stage.

Some analysts argue that the very term "Japanese defence industry" paints an inaccurate picture, as the country's fragmented collection of defence manufacturers produce many of their weapons and missiles under licence from US companies.

Save for the Defence Agency (JDA), there is no market for Japanese arms and no single Japanese company derives more than 50 per cent of its revenues from defence-related sales. In 2001, Mitsubishi Heavy - the country's leading defence supplier - was 19th in the world defence rankings. Its Dollars 3.9bn (Pounds 2.1bn) of defence revenues compare with Boeing's sales of Dollars 57.9bn.

The picture looks even bleaker this fiscal year. The country's defence budget has more or less been frozen, with about Y100bn (Pounds 520m) - nearly one-eighth of it - being allocated to the joint development of a missile defence system with the US.

"Because most components for the missile defence system will be procured from the US, the Japanese industrial circle is concerned that their sales will decrease," says Takashi Inoue, manager at the Space, Energy and Technology policy group at the Keidanren, a powerful business lobby.

But ironically, Japan's involvement in the missile defence system may prove the event that leads to the lifting of the arms export ban. The ban is to be revisited later this year, when an advisory panel and a JDA panel release reports on Japanese defence. The government is planning to endorse the first new defence guidelines in a decade by mid-December.

Shigeru Ishiba, director-general of the defence agency, has already called on Japan to review its ban on weapons exports, much to the chagrin of officials such as Yasuo Fukuda, the chief cabinet secretary. For the pacifist nation, the issue remains delicate.

Gen Nakatani, a former defence minister, favours lifting the ban, but concedes that the outcome could be one-sided. "The US would probably protest if we jointly developed weapons with countries with which the US has unfriendly relationships," he said.

Some experts say that, rather than lifting the ban, the government might just grant an exception regarding the missile defence project.

There is already one exception to the export ban: Japan is permitted to transfer defence-related technology to the US. But while many countries justify defence spending by demonstrating how military technology can be used to stimulate civilian inventions, Japan's record of innovation has little to do with military investments.

Instead, many Japanese commercial technologies end up being deployed in defence applications, labelled as "dual-use" technology.

While the export ban remains, Japanese companies remain unable to develop systems jointly with foreign companies. "Because projects for the defence industry are so costly, international joint development is the mainstream trend," says Mr Inoue.

But lifting the ban could also expose Japan's protected industry to international competition, possibly harming the 1,000 companies that provide the JDA with defence-related products.

Despite that risk, many are convinced that lifting the arms export ban may not be as controversial as the decision to send troops abroad, the first time it has done so since the second world war.

"When I came to Japan in 1976, I came to a country hardly willing to admit to having such a thing as a self-defence force," says Robert Orr, president of Boeing Japan. "The decision to lift the ban remains up to the government. But if Japan's objective is to become more of a player on a global scale, it is probably the way they will have to go."

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